What is Real Estate Syndication

By Besides the relatively rare market crashes, real estate can be one of the most stable and secure ways to invest your money

By Thomas Mensendiek

Real Estate Syndication

Real estate has been one of the most popular investment
avenues for a long time.

Besides the relatively rare market crashes, real estate can
be one of the most stable and secure ways to invest your money, knowing that no
matter what happens, you will still have a property that will have value.
However, for most people, owning more than one property is not an option –
investing hundreds of thousands or even millions into a real estate development
project is out of reach for middle-class families.

That’s where real estate syndication can be so helpful.

With the help of private real estate syndications, you can
pool resources with other investors and reap the benefits of real estate
investing without having to put down a large amount of money.

And today, with the rise of online crowdfunding, it is
easier than ever to syndicate investment into real estate.

Who Are the Players Involved in Real Estate Syndication?

Now that we figured out what is real estate syndication, we
need to understand how the process of syndication looks and who are the main
players involved in it.

In most cases, real estate syndication involves three main
parties:

· The main
syndicator, also known as a real estate sponsor;

· The investors
who pool their resources;

· Equity partner
who helps to connect the sponsor to the investors.

All three of the main parties play a vital role in the
process, so let’s explore their parts in more depth.

The primary sponsor is usually someone who has experience
and deep knowledge about the industry and the real estate syndication structure.

He must be able to identify investment opportunities, have
the means to acquire them, and know how to manage the properties once they are
bought.

This person or group of people will have to earn the trust
of investors if they are going to pool enough resources to execute their real
estate syndication business plan, so they must have a proven track record and
be able to provide a solid syndication deal, showing why a particular
investment makes sense.

The investors are a group of people who pool their resources
into a specific project and then gain ownership of a percentage of the property
based on the size of their investment.

But while the investors gain the full ownership rights and
get a share of all the profits from rent and the eventual sale, they do not
take part in the acquisition or management of the property.

Finally, the equity partners serve as a link that connects
sponsors with investors and can help communicate relevant information, prepare
the necessary documents, and perform a range of other tasks.

Online & Offline Real Estate Syndication

The advent of the online business world and crowdfunding has
completely changed the way commercial property syndicates are executed.

Not too long ago, the only way for sponsors to find trusted
investors was to go through their personal contacts or use a JV/equity partner
who had the necessary connections.

But with the help of online syndication marketplaces,
sponsors can now gain access to thousands of accredited investors from all over
the United States who can invest through the platform and cut out a lot of
manual work in transferring funds, tracking information, providing reports, and
much more.

The process has become so streamlined that the overhead
costs of executing a commercial real estate syndication project have become
much lower, not to mention the speed and efficiency with which a project can
now be completed, which is beneficial to everyone involved.

Private Real Estate Syndication

As we mentioned before, technological and software advances
have made it much easier for investors to crowdfund and take part in larger
real estate projects.

But it has also been extremely beneficial to sponsors.

They can not only easily find investors using various
marketplaces, but can actually set up their own private real estate syndication
platform musing available private-label solutions that can be installed on any
website.

This allows fundraisers to keep the entire project in-house
and avoid having to use public marketplaces that often take a cut from every
transaction.

Why Should You Take Part in Real Estate Syndication?

At this point, you should have a pretty good understanding
of what real estate syndication is and how it works.

But now, you may ask yourself – why does it make sense for
you to participate?

Well, there are a lot of reasons why real estate syndication
makes a lot of sense for smaller investors.

First off, you gain access to lucrative investment
opportunities that would otherwise only be available to those who can invest
hundreds of thousands or even millions of dollars.

By pooling your resources with other investors, you can get
a share of the profits from rent and eventual sale, even if you can’t invest a
large amount.

Second, you can use the expertise and experience of the
sponsor who will pick the right investment opportunity and arrange all the
details, so you can sit back and wait for the investment to pay off.

Finally, by investing in smaller amounts, you can diversify
your portfolio and ensure that your assets remain secure and that you maximize
your chances of growth.

If you would like to receive professional
representation as a landlord or investor in the San Francisco area, Thomas
Mensendiek can help – just call 1-415-865-6117, and we will answer any
questions you might have